75 entries from November 2009

November 30, 2009

Did you shop this past weekend (including last Friday -- AKA Black Friday)?

The past three days (the three days after Thanksgiving) are some of the wildest in retail stores each year. Believe me, I know. I used to work for a retailer and even though I worked at the home office, we were required to work one day between Thanksgiving and Christmas. As a result, I worked several Black Fridays. It was a zoo!!!!!!!

So here's my answer to the question above:

No, I did not shop in a retail store on the Friday after Thanksgiving. We had guests in, so I was otherwise preoccupied. But even if we didn't have them over, wild horses could not have dragged me to a store on that day. Why? Because crazy people (and lots of them) shop on Black Friday. No thanks.

I did shop online. I worked the day after Thanksgiving and spent a part of the day getting a few things online. No crowds at all. It was GREAT!!!!

I was in a few stores on Saturday (at off times) and traffic was light at best. Hmmmm.

My boss has an annual tradition of going out early (like being there at 4 am) to shop the day after Thanksgiving and he did even more this year (more on that in an upcoming post). Good for him. I wish there were more people like that actually, so they can get their shopping over and leave the stores open for the rest of us sane people to do our shopping later. :-)

How about you? Did you shop in stores or online any of the three days after Thanksgiving?

My mom is retired and lives on the East Coast. She still lives in the house that I grew up in and wants to put it up for sale this spring since it's too big for her to handle by herself (the house is fully paid, no mortgage). I am currently in LA because of my job (yes, I know that the cost of living is ridiculous here). My husband is applying to medical fellowship positions, so that means he won't have a permanent job for another couple of years. Because of his job situation, we can't predict where exactly we're going to settle down in this spread out metropolitan area. My mom wants to buy a condo near us (I am her only child), but I'm guessing that we would probably only be in this exact area for another 2.5 years, maybe. My husband doesn't seem keen about staying in this exact area after he finishes his fellowship. I would like my mom to live near us, since that's the reason she would move to the LA area in the first place, but she would like to just buy a place and stay there. She doesn't want to buy and sell again. She wants to buy property as a way to store the money from the sale of her current house (worth ~$500,000, I'm guessing).

She's concerned that if she just puts that money in CDs (in a couple of different banks for the sake of FDIC insurance) until my husband's job situation is settled that the money would lose value because of inflation. I know that if you buy property, you should try to stay there at the least for 3 years, so I don't know if buying property and keeping it for a short-term is a good idea for her. What would you recommend that my mom do with the money from the sale of her house for ~3 years? After that time, my mom would buy a condo near where my husband and I are settled. I would greatly appreciate any input.

In this example, the author got rid of her one-and-only car. She's saving a lot of money and is feeling great (walking a lot.) But I've been wondering about a different scenario -- is it worth it to get rid of a second car in a family?

Almost every couple I know has at least two cars. One guy in my office even has five cars and only four people in his family (only three are driving age)! In America these days, many kids get cars as soon as they are old enough to get behind the wheel. We have cars, cars, cars everywhere!

I think this stems from the fact that we love our freedom -- and nothing says "freedom" like being able to go wherever you want whenever you want. And how can you do that unless you have a car? It's hard to be "wild and free" on a bus schedule.

Here's the breakdown of the pros and cons of owning a car IMO:

Pros

Freedom to go where you want when you want

Convenience (don't have to plan to manage one car or public transportation)

Cons

Costs

Convenience (in many bigger cities, having a car is a huge convenience hassle)

Now, can you make a compromise between having two (or more) cars and only having none? Is it worth it to move to one car?

Well, you and I would certainly save a ton doing this, but for me the convenience factor far outweighs the cost. As long as I can afford a second car (and I can -- we've paid cash for all the cars we've ever purchased including our second car), I'm going to have one. If it costs me $10k per year, it's worth it. I see this as one of the fruits (benefits) of hard work -- the ability to have a second car and make life much easier for me and my family.

When we were first married, I spent about a year taking the bus to work. We lived in Pittsburgh and our company had just moved from the Northside (a relatively easy place to drive to from where we lived) with company-designated parking to downtown (across the river) with very few parking options (and the ones that existed were expensive.) I wasn't at the level where the company paid for my parking, so if I wanted to park anywhere close to work, I had to foot the bill myself. So, I took the bus. It was a nightmare -- having to be on a set schedule, lacking any sort of flexibility, having to deal with delays, having to deal with the sort of people that ride the bus (I know, that can sound terrible, but if you've ever ridden the bus, you know what I mean.) Other than days when we had bad snow and hideous traffic, riding the bus was the worst. The absolute worst. (BTW, I tried the option of driving to the Northside and taking a shuttle over to downtown, but that combined the worst of both worlds -- still cost a good amount and involved all the issues that made riding a bus a problem.) Ultimately, I decided to pay for parking myself and park downtown. It was a big budget hit for me, but made my quality-of-life so much better.

On the other hand I'm guessing that people that live and work in cities like New York and Chicago, cities that have good public transportation options, can make it pretty easy without a car. In fact, this is one cost in favor of living in a big city (and there aren't many, as you know.) Sure, you'll have costs of cabs, subways, busses, etc. and have to put up with some inconvenience (plus a sorted cast of characters that also takes public transportation), but you'll still end up saving a ton and won't have to deal with the inconvenience of trying to drive and park a car in a hostile environment (which is what an ultra-urban setting is for many drivers.)

Not much of a real conclusion in this post, but I wanted to bring up the topic, ramble on it a bit with my thoughts, and hear what all of you think of the issue. Have at it!

This piece details a series of studies from a professor at BYU. It's a long article and you can get into the details if you like, but I'm simply going to cover the highlights. We'll start with what he initially found when crunching some government data:

I worked for months on my computer in my darkened office. My conclusion was, sure enough, that when people get richer, they tend to give more money away. But I also came up with the following counterintuitive finding—that when people give more money away, they tend to prosper.

Specifically, here’s what I found: Say you have two identical families—same religion, same race, same number of kids, same town, same level of education—everything’s the same, except that one family gives $100 more to charity than the second family. Then the giving family will earn on average $375 more in income than the non-giving family—and that’s statistically attributable to the gift.

What follows is funny (in a way.) He said he didn't believe the results so "I did what college professors always do in this case: I got rid of the data." Ha! Sounds like many of the studies I read were done by people like this. :-)

But our researcher kept on:

I ran the numbers again and looked at volunteering. I found the same thing: People who volunteer do better financially. I ran the numbers on blood donations. Think about that—giving blood. You’re not going to get richer if you give blood, are you? Well, yes, you are.

Good for me. I just gave blood the other day. ;-) He goes on -- now from a Christian POV:

The more I ran the numbers, the more I kept getting this crazy result. But still I refused to believe it. In desperation I finally went to a colleague who specialized in the psychology of charitable giving. “I’m getting this result I can’t understand,” I told him. “It doesn’t make sense. It’s like the hand of God or something on the economy, and I can’t believe it’s true.”

This shook me a bit, but just for a second. “Yeah, but I’m also a social scientist,” I shot back. “We’re not supposed to believe those things. I need a more earthbound explanation.”

“Well, I’ll give you one,” he said. “We’ve known this for 30 years in the psychology profession. You economists— you worry about money all the time, and money is boring. We worry about something that people really care about—the currency by which we really spend our days—and that’s happiness. We’ve known for 30 years that people who give get happier as a result.”

People who give to charity are 43 percent more likely than people who don’t give to say they’re very happy people. People who give blood are twice as likely to say they’re very happy people as people who don’t. People who volunteer are happier. You simply can’t find any kind of service that won’t make you happier.

Studies show that when people give, it lowers their levels of stress. People who do their jobs with less stress tend to be more productive and successful. Throughout our lives, if we can find ways to relax, we will profit from it.

The study concludes that when people see strangers giving charitably, they recognize a leadership quality in those strangers. If people witness you as a giver, they will see a leader. Servant leadership is a secret to success, whether you’re looking for success or not. When people see you giving and cooperating and serving others, they will see in you a leader, or a future leader, and they cannot help but help you.

Many other studies show that givers have better health, that givers are better citizens—it goes on and on. The bottom line is this: Givers are healthier, happier, and richer in this country—and probably around the world. Giving creates stronger communities and a more prosperous nation.

And some info that fits well with the subject I write about every Sunday:

Who gives the most? And who’s getting this wonderful benefit for themselves and their communities?

The number one characteristic of those who give in this country is that they practice a faith. Of people who attend worship services every week, 91 percent give to charity each year. Of people who don’t attend every week, 66 percent give. This translates into millions of people who are healthier, happier, and more prosperous than their neighbors, and it charts back to their religious experiences.

What do the data tell me as a Christian man? They tell me that people who take their faith seriously are the beneficiaries of giving because we tend to give a lot. We’ve been taught to do what is right, and we are reaping the reward.

He then asks how we can help other people give more today and suggests starting by working to dispel some myths about charitable giving. These are:

Myth number one: Giving makes us poorer.

Myth number two: People are naturally selfish.

Myth number three: Giving is a luxury.

Myth number four: You will hear in the coming days and weeks and months that if our country were doing what it should be doing for people in need, then we wouldn’t need private giving, that the government would be taking care of people who need it, and that we would not need you to step in to provide for others. I am here to tell you, having looked at the data, that the day the government takes over for you in your private charity is the day we get poorer, unhappier, and unhealthier.

And he ends with this:

I promise you that this really works. Either because of God in heaven—or because of our neurochemistry. But it really works.

From my personal experience, I can say that when my wife and I started giving we saw the biggest increases in our income. And as we gave more, we made more. Kinda interesting, huh?

November 28, 2009

Why do so many people hyperspend? Prior to the economic reversals we have recently encountered, most people had similar sets of beliefs about the positive relationship between spending on products and happiness. But in reality, increased spending does not make one more satisfied with life overall. For many people, it actually has the opposite effect. But, conversely, who are those who are happy? Typically they are those who spend below their means while building wealth and ultimately becoming financially secure.

A few thoughts:

1. I agree that many people think that if they buy this or that (bigger house, new car, boat, etc.) that they will be happier.

2. I also agree that purchasing things just to make yourself more happy usually doesn't work.

3. Those things said, I do believe that purchasing SOME extras that you can afford and are within your budget will give you more enjoyment in life.

4. There is a security and "happiness" associated with being financially secure that's very real. For instance, I haven't had much distress over the recent economic meltdown. Sure, I was disheartened when my net worth plunged initially, but I stuck it out, kept investing, and now its back. But other than that, I've had zero financial worries. A key part of this is that my job is secure and our company is doing very well (record year for the fiscal year that just ended), so if my job was to disappear, things would be different. Even if that did happen, I've built up a good reserve and would be able to make it through the storm until I found another position. So I can see what he means -- that those who spend less than they earn and build wealth are happier than most.

November 27, 2009

Simply stated, your net worth [augmented -- assets minus liabilities] should equal 10 percent of your age times your annual realized household income (0.10 x age x income = expected net worth.) If your actual net worth is above this expected figure, I consider you affluent, given your age and income characteristics.

Using this measure, I qualify as affluent. Not that it does much for me...

In the past, we've had discussions about a similar formula (maybe the same as the one he used in his first book?) and many people thought it discriminated against younger people. For instance, someone who's 22, just out of college with $30k in debt, and who recently took a job making $40k per year needs to have a net worth of $88k to be considered affluent. This level is very hard to reach without at least a few (if not more) years of working and saving.

So when is the formula accurate? After all, it tries to take into account both age and salary (the two issues that are the problem here.) Is it valid once people get to 30? 35? 40? Or maybe there's another/better way to keep score. Or maybe it doesn't really matter if you're "affluent" or not. What good does it do you anyway to know this?

What are your thoughts on this issue? And are you considered affluent using the author's formula?

For weekday updates of what I find to be some of the most interesting personal finance articles on the web, follow me on Twitter. For now, here are some pieces I found especially worthwhile and some of the carnivals Free Money Finance was in this week and my posts that were included:

November 26, 2009

Just want to wish you and your family a blessed and very happy Thanksgiving. May we all take a break from talking about money and focus on the things that really make us thankful. Here's my list -- still the same after two years (except maybe the KFC part.) ;-)

The site will have a couple (at most) posts tomorrow (at least that's how I'm planning it) and one each day this weekend. After that, we'll be back to full speed ahead.

In America, it is not at all unusual for children from modest means to become high-income-producing adults. Then they are fooled into thinking that all those with the means to do hyperconsume. They are wrong. Most rich people become wealthy and stay that way because they are frugal and are investment, not consumption, oriented. Most of those who have high wealth indices said that they came from families that lived well below their means.

A few thoughts:

1. I don't think it's a surprise to anyone that what parents do influence what their kids think/do.

2. The parent/child money relationship isn't clear to me. It doesn't seem like there's one "if you do this your kids will do this" rule.

3. Personally, I came from a family of modest means and am now a high-income-producing adult. I know for a fact that my upbringing had a huge impact on this (I've ALWAYS wanted to make a good amount of money so that I wouldn't have to be constrained like my parents were.)

4. That said, I didn't develop a lifestyle of hyperconsumption. I think this happened for two reasons: 1) my family always stressed paying your bills and not owing much to anyone and 2) my wife is very fiscally conservative. Any inclination I had to hyperconsume was killed the day we got married. It's interesting that that's the case because my wife was also from a family of modest means and she had her own solid income level when we got married.

5. The "investment versus consumption" orientation mentioned above is an interesting concept. How is it determined that someone is one or the other? Maybe it's how much they spend compared to how much they save. I hope he goes into this a bit more later on in the book.

I am a big fan of using credit cards for rewards (I'll detail the results of my Schwab 2% cash back card sometime in January), but I've NEVER used any of these extra perks. Have any of you? How often? What are the pros (money back or savings I assume) and cons (like the hassle they give you to redeem) of these options?

Cleaning person -- 29% gave nothing, 58% gave cash, 17% gave a gift, and $50 was the median value of the gift

Child's schoolteacher -- 44% gave nothing, 20% gave cash, 38% gave a gift, and $20 was the median value of the gift

Hairdresser -- 54% gave nothing, 36% gave cash, 11% gave a gift, and $20 was the median value of the gift

Manicurist -- 62% gave nothing, 33% gave cash, 5% gave a gift, and $10 was the median value of the gift

Newspaper carrier -- 69% gave nothing, 30% gave cash, 2% gave a gift, and $15 was the median value of the gift

Pet-care provider -- 69% gave nothing, 26% gave cash, 8% gave a gift, and $25 was the median value of the gift

Barber -- 71% gave nothing, 26% gave cash, 3% gave a gift, and $10 was the median value of the gift

Gardener/lawn-care crew -- 77% gave nothing, 18% gave cash, 5% gave a gift, and $30 was the median value of the gift

Mail carrier -- 81% gave nothing, 13% gave cash, 7% gave a gift, and $20 was the median value of the gift

Garbage/recycling carrier -- 92% gave nothing, 6% gave cash, 2% gave a gift, and $20 was the median value of the gift

Here are some thoughts I had looking at this list:

1. Most service professionals get nothing from most of their clients. Only the cleaning person and child's schoolteacher had over 50% that gave some sort of gift.

2. For people that give something, cash or cash equivalent (check or gift card) seems like the preferred method. It's the same for me. That way you know they can get something they want.

3. Cleaning people make out the best -- probably because they 1) earn more overall (so their tip is bigger if it's a percentage of their earnings), 2) they are more likely to be considered a "friend" or "part of the family" and 3) they are more trusted (they're in your house, after all.)

4. The median gift was pretty much what I expected -- $20 or so seems to be the norm.

5. I wonder if these amounts will go down do to the continuing poor health of the economy.

Here's what we do for each of these:

Cleaning person -- Don't have one.

Child's schoolteacher -- Our kids are homeschooled.

Hairdresser -- A friend of the family that we already buy a present for.

Manicurist -- Don't have one.

Newspaper carrier -- $20 gift card to Meijer.

Pet-care provider -- Don't have one.

Barber -- Don't have one. Still do my own hair. :-)

Gardener/lawn-care crew -- Don't have one.

Mail carrier -- $20 gift card to Meijer.

Garbage/recycling carrier -- Nothing. These guys are lucky I keep them on the payroll. I'm tempted to switch companies, but our association has a special deal with them.

How about you? Do you tip during the holidays? If so, who and how much?

November 24, 2009

The reason why so many homeowners today are having a difficult time making ends meet goes way beyond mortgage payments. When you trade up to a more expensive home, there is pressure for you to spend more on every conceivable product and service. Nothing has a greater impact on your wealth and your consumption than your choice of house and neighborhood. If you live in a pricey home in an exclusive community, you will spend more than you should and your ability to save and build wealth will be compromised.

My research has found that most people who live in million-dollar homes are not millionaires. They may be high-income producers but, by trying to emulate glittering rich millionaires, they are living a treadmill existence. In the United States, there are three times more millionaires living in homes that have a market value of under $300,000 than there are living in homes valued at $1 million or more.

My thoughts here:

1. I understand completely what he's saying. When we were looking to move, I had estimated that the upgrades we needed to the new (bigger, more expensive) place would have cost us at least $20k initially (that doesn't count moving costs or fees to sell our home) and another $5k per year more in maintenance/on-going expenses. And we were looking at a home in the $350,000 range. Imagine what the costs would be on a million-dollar place!

2. Following that thought, just think what happens to the people who get Extreme Makeover homes. It's no wonder that many of them go into foreclosure or have to be sold -- even though they aren't in a new/more expensive neighborhood, costs for home maintenance are now way, way more than they were before.

3. We saw several high-priced homes on a recent tour of model houses. Some of our thoughts were along the lines of "boy, I'd hate to have their gas and electricity payments."

4. In the above, there's more keep-up-with-the-Joneses stuff going on.

We're regifters, though I realize not everyone is. That said, regifting isn't something only a few people do. According to CR, it's done by 36 percent of Americans and is growing (up from 31 percent the year before.)

Here's what we do when we receive a gift we don't want (assuming we can't return it):

If we think it's a nice gift but just not something we would personally use/like, then we put it in our "regifting dresser" (we have a couple drawers set aside for items that can be regifted). If it's a total loser item, we put it in another drawer to be donated at a later date.

When a birthday, anniversary, holiday, etc. comes up and we need a gift, we check out the drawer and see if there's a suitable item available. By "suitable item" I mean we ask ourselves "would the recipient like this?" If the answer is "yes", we give that gift. If there aren't any gifts that we can say "yes" to, we go out and buy them something else.

Every year we look through the drawer and see if there's anything in it we have had for awhile and we don't think we'll ever get rid of. If there is, we give it to charity at our next group donation (we let a few things build up and then drop them all off at once.)

This post is part of the one day blog event “The Spectrum of Personal Finance.” In this event, Brian of My Next Buck, will discuss 8 different emotions and relate them to personal finance. Here at Free Money Finance we will be looking at Death. To view the rest of the event look at the bottom of the page to see the other blogs hosting articles.

In the coming weeks we are going to hear more and more stories coming from Congress discussing the death tax. For those that don’t know, the death tax, more appropriately known as the “estate tax”, is a tax on wealth being transferred (i.e. inherited) from one generation to the next upon the death of the owner. The estate tax has always been dubbed as a tax on the uber rich, but if Congress doesn’t make some changes in the near future, this will be a tax on anyone with taxable wealth of over $1 million beginning in 2011.

Unfortunately, $1 million sure can’t buy what it used to, especially if you plan to retire someday. It is likely that a lot of us will shoot for nest eggs well over the million dollar exemption by the time we reach retirement, making our wealth eligible to be taxed at an alarming rate of 55% upon our deaths.

Don’t Plan on Dying in 2011

This topic does have a sense of morbidity about it. It’s really not cool to think about an appropriate time to die. Then again, with the way the taxes are currently set up, dying in 2009 vs. 2010 vs. 2011 could mean millions of extra dollars in taxes for dependents. Here are those three years’ exemptions and maximum tax rates:

2009 - $3.5 million; 45%

2010 – No exemption, 0% (tax repealed)

2011 - $1 million; 55%

If an individual with a net worth of $3.5 million dies in 2011 compared to 2010, the individual’s family would pay $1.375 million in additional taxes. Regardless of your political affiliation, I think it’s safe to say that no one would want to pay an extra $1.4 million in taxes on January 1st 2011 compared to $0 on December 31st 2010.

Why You Should Care

The $1 million exemption limit that will go into effect in 2011 may sound like a fair amount. After all, a million dollars is a lot of money. For those that have worked hard and accumulated wealth over the years to afford retirement, and for those that have helped their parent’s estate plan, this could mean that a bulk of hard earned money could be going to the Fed’s coffers instead of your family’s.

It’s never too early to worry about these issues. At the age of 25 I plan on saving, investing, and growing my wealth to a nest egg that greatly exceeds $1 million. I would hate to put 40 years of work into building my wealth, only to see 55% of anything in excess of $1 million be taken away from my dependents by the government.

If you are a small business owner, you have to be even more concerned as a lot of small businesses get liquidated as a means for families to pay the estate taxes of the deceased. Speaking of liquidation, if your assets are tied up in real estate and other non-liquid investments, beware that those assets are likely to be sold promptly to pay off these taxes. Many families lose their businesses and even their homes because the majority of the owner’s assets are not liquid.

What Can You Do About It?

While estate taxes are going to be unavoidable in the future, it’s in the best interest of you and your dependents to take a few steps NOW to minimize the effect of the tax on your wealth. Here are a few things you can do today to plan for tomorrow:

Make lifetime gifts (up to the point of hitting a gift tax) – You can give up to $13,000/year per recipient without paying any tax. You can also pay someone’s medical bills, tuition or give to charity without paying tax. This reduces the size of your estate and the eventual tax bill.

Create an irrevocable trust – These trusts allow you to “remove” ownership of the assets held inside the trust (usually cash, investment assets, a business). Therefore you are technically removing the assets from your taxable estate. Furthermore, the grantor is also relieved of the tax liability on the income generated by the assets in the trust.

Create a Living Trust with “A-B Provisions” – This trust is complex, but in short, it allows you to pass your estate onto your heirs, while still allowing your spouse to have full access to the funds. The funds will not be transferred to the heirs until the spouse passes. However, the tax bill is for the original amount of the grantor’s estate, which means any appreciation in value of the estate will not be taxed.

Set up and Transfer a life insurance trust – A life insurance trust exists to own a life insurance policy. If the owner of the policy transfers ownership of a life insurance trust to a beneficiary, the proceeds will be completely free of estate taxes.

Go see an attorney and an estate planner – This stuff is complicated and an attorney can help you sort through all of the fine print and possibly come up with some more creative ways to mitigate your estate tax liabilities.

Keep an eye out over the coming weeks as the estate/death tax starts to make more news. It is unlikely we will see a repealing of the tax for 2010, but it is possible that new legislation will be passed that may impact your estate plans. Pay attention and meet with your financial advisors to ensure that your family is taken care of with or without you.

For further reading of the Spectrum of Personal Finance Event, please see:

[In this book] I detail why so many people who are not rich hyperspend on luxuries. Often they think that collecting these expensive toys will enhance their overall satisfaction with life. But, as you will read in detail, happiness in life has little to do with what you wear, drive, eat, or drink. The people with the greatest satisfaction are those who live well below their means.

Wow, lots to digest here. I'll comment on this in a minute, but let's continue with a bit more for now. Author Thomas Stanley then offers a thought on why some people spend so much:

So who are hyperspenders really emulating? They are merely mimicking the behaviors of people like themselves, who are not rich but act in ways they think economically successful people act.

And, on the opposite end of the spectrum, here's why others don't spend as much:

Why is it that some people worth $10 million, $20 million, or even $30 million own few or no luxuries whatsoever? They know that satisfaction in life is not a function of what you can buy in a store.

Several thoughts from me:

1. This may go without saying, but I'm going to say it anyway. This book highlights the habits and thoughts of the wealthy as defined by their net worth (the author doesn't count the value of housing in calculating net worth), not by their income. He contrasts this with others who make great incomes and yet have virtually no wealth to show for it. In other words, a high income often does not lead to a high net worth. Again, this is Money 101 for some of you, but I just wanted to be perfectly clear.

2. The book will highlight (and I'll post on this for sure) how many of the most wealthy (high net worth) people in America are those with "average" salaries/incomes.

3. Overall, what he's saying is very similar (almost identical) to what we just covered when I highlighted a few pieces from The Difference: How Anyone Can Prosper in Even The Toughest Times. Is anyone starting to see a trend here? Guess what they're saying must be at least somewhat valid, huh? (I'm being sarcastic -- of course it's valid. And yet, some will try and make excuses for why it's not really true.)

The following is a guest post by Bryan Olson, CFA, Vice President, Head of Portfolio Consulting for Charles Schwab & Co., Inc.

For more than a decade, Roth IRAs have been offering investors a number of benefits generally including tax free growth in earnings, tax free withdrawals assuming you begin your withdrawals after the age of 59 1/2 and have held the Roth account for the minimum five-year holding period, and no required minimum distributions as is the case with traditional IRAs.

Through the end of 2009, conversion to a Roth IRA from other retirement accounts including a traditional IRA or 401(k) plan is limited to people with a modified adjusted gross income of $100,000 or less. But as of January 1, 2010, all investors will be eligible to convert funds from a traditional IRA or 401(k) to a Roth IRA, regardless of income level. While this change will present some attractive options for certain investors, people should weigh the costs and the benefits unique to their own specific financial plans and tax situation before deciding if a Roth IRA conversion is right for them.

What is Roth IRA? How is it different from a traditional IRA?

Roth IRAs offer several unique characteristics that differ from a traditional IRA. First, growth in a Roth IRA is generally income-tax-free, meaning that while you pay taxes on your initial contributions, you do not pay income tax or capital gains on any earnings in your Roth account, assuming you begin your withdrawals after the age of 59 1/2 and have held the Roth account for the minimum five-year holding period.

Second, qualified withdrawals after the age of 59 1/2 are tax-free, which can be very useful for people seeking to manage their income tax bracket in retirement. In addition, unlike a traditional IRA, in which required minimum distributions (RMDs) are mandatory beginning age 70 1/2, a Roth IRA does not require withdrawals at any time during a person’s lifetime, so investments can remain in the account and continue to grow until they are needed.

Third, contributions can be withdrawn from a Roth IRA at any time tax-free, but they are not tax-deductable up front. Conversely, contributions made to a traditional IRA may be eligible for a tax deduction when contributed and are taxed upon withdrawal, but cannot be withdrawn without penalties until the age of 59 1/2.

The case for converting: What are the potential benefits?

While the two main reasons that investors typically consider converting to a Roth IRA are to achieve a greater ending portfolio value or to capture estate planning benefits, there are a few additional potential benefits as well. Here a few reasons converting to a Roth IRA might make sense:

Potentially greater ending portfolio value: If you think your future tax rate will be the same or higher than the rate you're currently paying, you may enjoy a greater ending portfolio value if you convert your funds to a Roth IRA now, because the taxes you pay on the conversion amount today will likely be less than the taxes you'd pay on withdrawals from a traditional IRA in the future.

Estate planning: If you don’t think you will need to utilize your IRA to live off of in retirement (including emergency expenses such as health care) and your goals include maximizing the assets you leave to heirs and beneficiaries, a Roth IRA can offer some unique estate planning benefits. While the value of a Roth IRA will still be included in a person’s gross estate, because there are no required minimum distributions, the account could grow larger than it otherwise might under traditional IRA distribution rules. This can leave more for heirs to withdraw income tax-free over their lifetimes. In addition, the income tax paid at conversion (preferably from assets other than the IRA) will reduce the owner’s gross estate. In effect, the account owner is prepaying income tax on behalf of future beneficiaries without such payment being recognized as a taxable gift.

Tax-risk diversification: Risk diversification is a key tenant of investing and diversifying tax risk can be an important factor to consider. Diversifying income tax risk means considering whether and how assets should be divided among three primary types of accounts:

Taxable accounts in which taxes on investment income and capital gains are paid as they occur,

A tax-deferred account such as a traditional IRA in which taxes are paid at the ordinary rate in the future when you make withdrawals,

And a tax-free Roth IRA account in which contributions are after-tax and/or taxes are paid upon conversion for investments going into the account, and qualified withdrawals are income tax-free.

Flexibility to influence income tax bracket in retirement: Individuals in a higher tax bracket at age 70 1/2 might be forced to take RMDs from a traditional IRA even though they do not need the money at that time. This can also result in taxation in a higher tax bracket. Converting some assets to a Roth IRA will lower RMDs from a traditional IRA, thereby lowering taxable income and potentially even an individual’s tax rate. Roth IRAs allow for additional flexibility in retirement since Roth IRA qualified withdrawals are tax-free and there are no required minimum distributions from a Roth IRA.

The act of converting a traditional IRA or 401(k) to a Roth IRA might have consequences that make it less attractive or appropriate for certain people. The most significant of which is the tax that becomes due at the time assets are withdrawn from a traditional IRA, but there are some other things to keep in mind as well.

Income taxes due: Converting traditional IRA assets to a Roth IRA triggers a taxable event. It does not make sense to convert to a Roth IRA if you cannot afford to pay these taxes from a readily available source other than the IRA. Investors who are younger than age 59 1/2 will incur a 10% early withdrawal penalty if they use funds from their traditional IRA to pay the conversion taxes. Investors over the age of 59 1/2 could pay taxes from their traditional IRA with no additional penalty, but this would significantly diminish the potential tax-free growth benefits of a Roth conversion versus paying the tax from sources other than the IRA.

Five-year lock up on conversions: Funds converted into a Roth IRA are subject to a five-year rule, which will result in a penalty if broken before age 59 1/2. There is a five-year waiting period for withdrawals for each conversion amount, which starts on the first day of the year in which the conversion is made. This rule only applies to the specific assets that were converted, not to withdrawals of earnings, contributions or previous balances.

The bottom line is that converting to a Roth IRA can be a complicated, individual decision with tax implications, so you should be sure to consult a professional tax advisor before making any final decisions. Additional details about the 2010 Roth IRA conversion rule changes and Roth IRAs in general are available at www.Schwab.com/Roth.

This information is for general informational purposes only and is not intended as an individualized recommendation or to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager.

Americans typically build retirement savings in three ways, says Laibson. For all of us, our required contributions to Social Security will provide a guaranteed monthly check. Owning a home and gradually paying off the mortgage during your working life generates housing wealth that supports retirees' standard of living (if you've paid off your mortgage, you don't have to pay out of pocket for housing). Finally, company plans, such as 401(k)s and defined pensions, provide the other key source of financial support in retirement.

So, the three-legged stool for retirement is Social Security, having a home paid off, and company plan (aka "personal savings" in my book), huh? Sounds right to me. I'm not counting on receiving anything from the first option and I already have my home paid off. So my entire focus right now is saving up as much as I can in both my 401k as well as in other personal accounts.

Of the three legs, there's one that is more important than the others in determining retirement savings success:

Laibson, who studies retirement issues as well as the psychological factors influencing savings behaviors, observes: "The most important driver (of whether an individual ends up retirement-rich) is the savings institutions at the workplace."

About half of all private sector employers don't offer any type of 401(k) or pension plan. That's a big reason why some 60 percent of Americans aren't building the savings they'll need.

"If their workplace isn't helping them save, they're not doing it on their own," Laibson says.

Of the rest, some 30 percent are saving just about adequately and 10 percent will wind up retirement-rich, according to Laibson. His estimates aren't based upon his own research, but rather upon sifting through dozens of research reports and integrating the findings.

2. Basically, I'm getting out of this that people don't have the motivation to save on their own. If their company doesn't force/encourage them to save, they don't do it.

3. 60% aren't saving enough. I'd say that's a big problem.

4. 10% are "saving too much." How actually is that done? Can't they run the numbers and simply retire earlier if they are indeed "saving too much"? For instance, if someone is 40, wants to retire at 65, and at his present rate of savings will have enough to retire at 60, why doesn't he simply do so (and is he really saving too much up to that point)?

Another way of looking at it is that he is not saving too much until he gets to 60 and keeps saving at his current rate. At that point, he's "saving too much", not when he's 40. Or looked at from a different perspective (one I prefer), he's building in a margin of safety with his retirement saving. It's much easier to give some away once you have too much than it is to save too little then try and earn more with limited opportunities and potential health problems at age 70.

Those who are followers of Christ are familiar with the final words of Jesus – the Great Commission. In this final exhortation Jesus encouraged his disciples to participate in ministries of baptizing and teaching. This movement by the man Jesus has grown all around the world. Not only has the movement grown, but houses of worship have grown. While historically some churches have focused on the artistic magnificence, churches today focus on sheer size. In a pragmatic sense we believe the capacity limits of these mega buildings must be honorable to God. The building (it is often said) is a ministry tool. Still, there are some who think these religious edifices would be an embarrassment to Jesus. Jesus lived a simple, nomadic life and would surely be uncomfortable with the money spent on brick an mortar while there so much suffering from injustice and poverty.

A simple search on Wikipedia reveals some starling statistics on some large (and expensive) church buildings.

Willow Creek's state-of-the-art Worship Center (completed in 2004 at an estimated cost of $73 million) seats over 7,200 people, making it over twice as large as the Kodak Theater in Hollywood and the largest theater in the United States.

It was the first church in the world to make use of two MitsubishiDiamond Visionhigh-definitionLED screens 14'x 24' in size, usually seen in new sports stadiums. Each screen is movable on its own track system and can be combined into one giant screen. The Worship Center also has innovative dual, stacked-deck balconies.

November 21, 2009

The following is a guest post from Kathryn Katz, an avid cat lover, single mom, internet marketer and professional copywriter. Kathryn is a Certified Personal Finance Counselor and works for Consolidated Credit Counseling Services.

Many consumers have suffered from financial difficulties during the recession. High unemployment, upside down mortgages and increased interest rates on credit cards are just some of the challenges facing Americans. If you’ve gotten behind in your bills, you might find that your creditors have charge-off your debts and suddenly you’re in collections.

There are many horror stories about debt collectors engaging in abusive, deceptive and unfair debt collection practices to intimidate consumers into paying their debts. Congress has passed several laws to govern how creditors and third party debt collectors can collect on debts to protect consumers:

This act gives the Federal Trade Commission the authority to take action against third-party debt collectors that violate the FDCPA, and original creditors who use unfair and deceptive debt collection practices. If your rights have been violated, you can complain to the FTC.

A credit report is created from information provided by data furnishers, which can include creditors, debt collectors and debt buyers. FCRA requires that all information provided is accurate. It details the process consumers need to follow for address disputes.

Because states are not allowed to enforce FDCPA, many of them have enacted their own fair debt collection statues. Many of these statutes mirror the FDCPA, and give law enforcement the power to protect consumers within their state. Here are some examples of state debt collection statutes:

Also, be aware of the statute of limitations that applies in your state. Your debt collector has a limited opportunity to file legal action against you. According to the FTC, the statute of limitations does vary by state but typically ranges from 3 to 10 years. In some states, the statute of limitations can restart under certain circumstances. For example, in Kansas, the statute of limitations resets when the consumer makes a payment towards the debt or acknowledges the debt in writing.

Before dealing with debt collectors, make sure you know your rights, and don’t be afraid to stand up for them if the debt collector is using abusive, deceptive and unfair debt collection practices.

Dr. Stanley’s research and the national survey carried out on his behalf by University of Georgia Survey Research Institute rips the lid off just about every assumption we have about who the really rich are (and aren’t), what they do (and don’t do) and what they buy (and don’t buy).

For example:

The #1 most popular make of car among millionaires is Toyota--not BMW or Mercedes

Real millionaires pay about $16 (tip included) for a haircut at a traditional barbershop

Nearly 4 in 10 millionaires surveyed buy wine that costs around $10

There are currently more than 350,000 millionaire educators (working or retired teachers or professors)--a profession that is far better at transforming income into true wealth than doctors or lawyers

Only 5.7 percent of all millionaires surveyed nationally paid $1,000 or more for their most recently acquired suit

Sixty-four percent of all real millionaires have never owned a second house – not even a rustic log cabin in the woods

The proportion of Americans who owned boats in 2006 exceeded the proportion who left an estate of $1 million or more in 2007 by a ratio of nearly 5 to 1

In the U.S., there are nearly three times more millionaires living in homes that have a market value of under $300,000 than there are living in homes valued at $1 million or more

The number one preferred brand of shoes worn by millionaire women is Nine West and their favorite clothing store is Ann Taylor--with the Gap and Costco not far behind

For weekday updates of what I find to be some of the most interesting personal finance articles on the web, follow me on Twitter. For now, here are the carnivals Free Money Finance was in this week and my posts that were included:

Augmented net worth is the "traditional" definition -- assets minus liabilities. It includes ALL assets and ALL liabilities. Specifically, it includes the market value of your home as well as the debt for your mortgage.

Net worth as he describes it in most instances refers to investment levels. If someone has "investments" (such as stocks, bonds, mutual funds, equity shares in a private business, annuities, net cash value of life insurance, mortgages and credit notes held, gold and other precious metals, CDs, T-bills, savings bonds, money market funds, checking accounts, cash, and income-producing real estate -- in other words, anything that's fairly liquid) of over $1 million, then he's considered a "millionaire." The author goes on to say that there are less than half of these millionaires that the "millionaires" listed when augmented net worth is used, so it's a more stringent criteria and excludes people that are "house rich" but not really wealthy (they way he defines wealth.)

The second definition of net worth leaves me wondering if he takes debt into consideration in any way. He doesn't mention (at least so far in the book) that the investments are net of any debt, and this is troublesome. To take it to an extreme, I could borrow $1 million, put it in investments, and he would consider me a millionaire, even though my "real net worth" (assets minus liabilities) was zero. This leads me to believe that he somehow does take debt into account (or maybe people with $1 million in investments simply don't have much debt), but I wish he would say so.

Personally, I think both net worth measures have value. The "net worth" I track for our family is augmented in that it does include the value of our home. That said, our home (with no debt on it) is less than 15% of our net worth, so it's not a big deal. But I do look at "liquid assets" as well. I'm a bit more stringent than his investment-based definition above on this one -- I eliminate assets/investments in 401ks and IRAs, longer-term assets that would be hit with some sort of penalty if I was to withdraw them. Anyway, Quicken makes it pretty easy to slice and dice our financial information, so it's easy to look at things several different ways to get a picture of where we stand. But in the end, what he defines as augmented net worth is the key measure I track.

Dieting and budgeting face similar hurdles in the American lifestyle. Some of us live to eat; others eat to live. Attempting to reduce our spending is every bit as challenging as trying to slim our waistlines. Some shop to live; others live to shop.

We can better understand mindless spending by looking at some of the psychological studies that Dr. Brian Wansink describes in his book "Mindless Eating." He explains, "Everyone--every single one of us--eats how much we eat largely because of what is around us. We overeat not because of hunger but because of family and friends, packages and plates, names and numbers, labels and lights, colors and candles, shapes and smells, distractions and distances, cupboards and containers."

"We all think we are too smart to be tricked," warns Wansink. "That is what makes mindless eating so dangerous."

One study compared the amount people would drink using two differently shaped glasses. One glass was tall and skinny. The other was short and wide. Each glass had the same capacity, but people would drink 25% to 30% more from the short glasses than the tall ones.

Interestingly, our brains focus too much on the height of objects and underestimate the effect of their width. So people with short wide glasses had to fill them more before they believed they had consumed the same amount as those with the tall skinny glasses.

We all think we can't be fooled by something as obvious as the shape of a glass. But our brains are wired that way, without exception. If you want to drink less, you can measure every portion or simply buy tall skinny glasses. Better yet, buy glasses that are very narrow at the bottom or elevated on a stem.

Finances work the same way, and by extension, so does mindless spending. Many families are struggling to get a handle on their savings. They are trying, often in vain, to find ways to cut back. But when we are worried about our expenditures, we tend to look at the dollar amounts more than the frequency of our purchases.

For example, a young woman named Emily inherited a sizable sum of money. She could have used it to make a sizable down payment on her first house. But instead of protecting her windfall, Emily attached a debit card to the account for the convenience of paying for a few items she needed.

In less than two years she had spent most of her inheritance in increments of no more than $35. That doesn't seem like a lot of money because the $35 height is relatively small. Given a width of three times a week, the height isn't even noticeable. The same $105 Emily spent would have seemed like a much larger budget item if it had been in a single purchase. In that case she might have refrained from handing over her debit card so casually.

Other purchases were $50 monthly memberships or $100 a month services. Very few of these purchases were over $100, but when they were added up, Emily had drained her account.

The frequency of a purchase matters even more than its height. But our brains tell us to be more concerned about the height.

Marketing firms use this principle all the time to bypass our defenses when they break annual purchases down into low monthly payments.

An offer I received in the mail recently explained its cost as "Only $4.99 per month with an annual subscription (billed as one payment of $59.88)." The advertised rate only applied if you were willing to purchase the entire year. If you wanted to be billed monthly, the rate was $9.99.

Advertising a $59.88 annual subscription fee as $4.99 per month relies on the fact that consumers are more sensitive about height than breadth. Note that the primary way they advertised the subscription, $4.99 a month, was not one of the options! Even more deceptive would have been making the offer 16.4 cents a day for an annual subscription. Less than a penny an hour!

They even marketed as a feature the service of charging your credit card automatically each year: "All subscribers get the hassle-free advantage of the Unlimited Automatic Renewal Program. At the conclusion of your first term and each subsequent term (one year or one month) we will automatically renew your membership upon expiration for the same period so you get continuous service unless you tell us otherwise."

Madison Avenue takes advantage all the time of the way your brain works. So it's in your best interest to learn to use your brain to your own benefit.

We recommend that every household have a dollar limit that domestic partners agree not to exceed without consulting the other. This way they can avoid budget busters, single items that can wreak havoc on a spending plan. The same caution ought to be put in place for any reoccurring charge, no matter what the price.

Similarly, when people are seeking ways to reduce their spending, they tend to look at big-ticket items or daily needs. A much less painful and more productive alternative is to look at the purchases you don't have to decide about every day (e.g., automatic subscription services).

Consider that the average family spends hundreds of dollars on a host of monthly services such as iPhone, Skype, TiVo, Netflix, Palm Pre, GPS Pet Locator, World of Warcraft, The Sims Online, anime subscriptions, comic subscriptions, health clubs, season tickets, and online file sharing or backup. Average people who can't afford to pay for their own health-care costs pay twice that amount in monthly subscription fees.

And each of these monthly fees is laden with extra features for an additional charge. Before the era of cell phones, I would save my quarters. If I needed to call home, I would stop at a pay phone. In addition to driving safely without the distraction of talking at the same time, which of course is still advisable, my phone expenses for the month were minimal. The latest base cost for an iPhone over two years is about $4,000, which could go a long way toward covering a family's annual health-care costs.

If you can afford a full-featured cell phone, by all means indulge. I assume you've done your retirement planning and are saving more than enough each month. If not, and you only need a cell phone for emergencies, however, buy a single-use cell phone and keep it in your car. You will only pay for the minutes you use, and the money you save will be significant.

If you saved and invested $2,000 a year at market rates of 10% a year, you would have about a million dollars in 40 years. Every young person with an iPhone is missing a million dollars at retirement to fund that trendy subscription.

Cutting back on reoccurring spending is easier because you don't have to decide every day to refrain from spending. Sometimes it is as simple as deciding to eliminate features. Extra charges accrue for voice mail, another for call waiting and still another for unlimited text messaging. If after you have dropped all these subscriptions and features you decide you really miss them, you can always add them back later.

If you are trying to cut back on your spending and save money, review every reoccurring charge on your credit card. Try living without the service or at least eliminating features. Many companies will release you from your contract and cancel your service for reasons of financial hardship. If you need to stop paying immediately, cancel the credit card being charged and get a new one.

Take your savings and set up an automatic transfer to your investment account. You can achieve big goals by making small changes consistently over time, which is the cornerstone of successful financial planning.

And although our brains aren't wired to realize it, frequency matters even more than height.

BTW, for those of you who don't know, all the proceeds from Free Money Finance are given away to charity. Every single penny from the beginning of this blog almost five years ago has gone to charity. Two years ago we topped $100k given and I'll bet we're now close to $200k. Anyway, I'll give you an update in January like I do every year, but for now I just want to say how much I appreciate you being part of this website. It's because you read and visit the site that it generates anything at all -- and those are the proceeds that go to help hurting people all over the world! Thanks for being part of the giving team!!!!!

November 18, 2009

Retirement planning is even more crucial for women than for men. Although most women are married, 85% outlive their husbands and are alone during their last years. Financial planning must address the unique issues facing older women who probably worked fewer years and earned less money than their spouses.

Sophie Tucker, whose early claim to fame was the song "The Last of the Red Hot Mamas," said at age 69, "From birth to age 18, a girl needs good parents. From 18 to 35 she needs good looks. From 35 to 55, she needs a good personality. From 55 on, she needs good cash. I'm saving my money."

Sadly, many older women lack good cash. Five of eight women rely on a husband's work records to receive their Social Security benefits. And for almost three of eight, those benefits represent 90% of their total income. Of those seniors who live in poverty, more than half are women.

Planning to have good cash must begin long before retirement. Many frugal and hardworking parents sacrifice to give their children the comforts that money can buy. In the process, however, they rob their children of character-building lessons they can only learn through personal experience.

This psychology is especially true for daughters, who are often protected from the discipline of handling money. Our daughters can only gain experience if we give them real responsibility. In other words, they need a safe way to learn the lessons of irresponsibility. As early as possible daughters should be given the slice of the family's budget that most directly affects them. By the time they are teenagers, they could be handling much of their own money.

A teenage budget offers financial training wheels. Only if teenage daughters are given money for clothes can they learn the tradeoffs between expensive outfits and other spending choices. Remember, not having sufficient money for everything you want provides a financial lesson that cannot be learned any other way. By giving your daughter enough money for all her wants, you're actually depriving her of future financial satisfaction and stability.

Be sure to include your daughter in family discussions about charitable contributions too. As children take charge of their own money, they can also learn generosity by choosing the organizations they want to support.

Parents are apt to require their sons to take a first job and protect their daughters from the working world. But by age 14 daughters should be working and funding their Roth IRA accounts. If you want to help, offer to match whatever your daughter earns so she can put your contribution into her Roth and still have spending money.

Every seven years a woman waits to start funding her retirement halves the amount of money she can save. Helping your daughter add $2,000 annually to her Roth IRA for the years between age 14 and 19 actually is a better choice than starting her at age 20 and funding her account for the rest of her life.

From age 18 to 35, Sophie says women need good looks. What they really need is a fiscally responsible husband. Often women leave the workplace completely to raise a family. Yet because women generally live longer and earn less, they cannot leave their retirement planning to later in life. A loving husband makes sure his wife's retirement isn't sacrificed to his career and the children's needs.

My advice to all women: Make your retirement a priority. You may be more concerned for your family's needs than for your own safety. Just as you must do in an airplane emergency, put on your own oxygen mask first so you'll be able to help those around you.

Fund your retirement even if you don't work. Unemployed spouses can still fund their retirement through traditional or Roth IRA accounts or simply by savings in a taxable portfolio.

Don't guess at the amounts you should be saving. Know what goal you are trying to achieve.

In addition to inflation and interest, retirement planning needs to take into account taxes, capital gains and the different ways to save: taxable, tax deferred and Roth. Retirement planning also involves projections of accumulating assets for 40 years and spending during a retirement nearly as long. You can't compute how much you should be saving on the back of a napkin.

Know what percentage of your retirement goal your current assets can grow and cover, so you can determine if you are ahead or behind schedule. It also helps to calculate if you are pacing yourself correctly. And then you can decide how much you need to be saving each month toward your retirement.

Pay yourself first. Your savings should be automatic. You won't miss what you don't see.

Automating your contribution to an employer-defined contribution plan is easy. If you aren't employed, you can still automate a taxable savings plan. Most brokers offer a link between your investment account and your checking account and also an automatic transfer between the two. It's a painless way to move money each month into your retirement or savings account.

Save and invest as little as $100 a month for 46 years earning 10%, and you can retire with a million dollars. And $500 a month grows to an astounding $5 million. Those gains can only happen if you start saving while you are young. If you are beginning later in life, you will have to save and invest more each month.

From age 35 to 55, Sophie says a woman needs a good personality. By that time in her life, Sophie was running her own company. At this point many women have finished raising young children and have time for business ventures. Serendipity in the business world often arises from our reputation for kindness. Sophie showed kindness even to strangers as a part of the Jewish practice of "tzedakah."

Best translated as "righteousness" or "justice," tzedakah goes beyond charity. It is the responsibility to reach out to others, giving of our time and money. According to the great philosopher Maimonides, the highest form of tzedakah is providing a person work so he or she can remain independent and self-supporting. Thus age 35 to 55 is a perfect time for women to turn their success into significance by starting a business.

From 55 on, Sophie continued to use her economic independence to help and empower others. She founded the Sophie Tucker Foundation, which contributed to a host of worthy causes.

Sophie Tucker continued working until weeks before her death at age 82. "The secret to longevity," she said, "is to keep breathing." Today's women are likely to keep breathing a lot longer. We recommend that women anticipate a retirement well into their 90s. Dying young isn't a good plan.

Preparing for retirement is more than putting money in an account. You must work periodically through mathematical assumptions and projections to ensure you will meet your retirement goals. Annual financial physicals ensure that your portfolio will remain as strong and healthy as you want to be.

Financial success is only one of the three components of a successful retirement. Having a healthy diet and staying active physically is equally important. And maintaining a good relationship with engaging and meaningful work is the most critical of all.

Sophie's gusto for enjoying a full life provided several generations with an example of a strong independent woman. Women at every age should be saving and investing at least 15% of the lifestyle they want in retirement. For every seven years they delay saving and investing, they cut that lifestyle in half.

Any plan older than two years is out of date. As your savings change, their projected value will cover a different percentage of your retirement goal. While market returns fluctuate and your standard of living increases, you may need to adjust your monthly savings. And your investments should grow gradually more conservative as you approach retirement age.

Financial independence opens doors for success and significance later in life. As Sophie Tucker reminds us, "I've been rich and I've been poor--and believe me, rich is better."

In the end, your actions are the language in which your money story speaks. Whether you choose to buy or not, to save, to invest, or to decide not to decide, your money behaviors will be the final expression of your beliefs, and will determine your financial success. Some of the following guidelines are restatements of suggestions you’ve encountered earlier in this book; some are new.

1. Keep your money mission statement always visible and in focus.

Your money mission statement defines the essence of your financial goals and the principles and ideals underlying them. It proclaims the meaning, use, and value of money to you, including short- and long-term plans. Keep this statement where you can see it often— on your desk, on your wall, on your computer—and review it periodically, refining it as needed, to make sure that it accurately orients your decisions with your purpose and philosophy.

2. Have a plan.

Create a strategy and a fully informed, well-structured financial plan, with provisions for saving and investment that are in alignment with your money mission statement, based on facts rather than on emotions. Periodically review your plan to make sure it reflects your purpose, your values, and your most up-to-date information and advisements from counsel you seek and trust.

3. Stick to your plan.

In times of trauma, crisis, or circumstances beyond your control, stick to your plan. In times of elation, unexpected growth, and great success, stick to your plan. When you are most prone to overreact, stick to your plan. When you recognize procrastination or failure to act or react, stick to your plan. When your plan isn’t working well, review whether you are fully executing the plan; if you are, then review the current validity of your plan. Once you are satisfied that your current plan is solid—then stick to your plan.

4. Seek out suggestions, critique, advice, and expertise.

Consult with people knowledgeable in specific areas. At times this may be difficult emotionally, when it would seem easier to consult (read collude) with someone who will mirror your views and agree with your opinions. The search for validation aims to maintain your comfort zone and avoid change. Consulting a mirror for advice is what the wicked queen does in Snow White. Leave the mirror for touching up makeup; for your plan, consult objective experts. Seek those expert in areas other than your own, and those with different points of view. Listen from another’s perspective, while not abandoning your own. Use that new information from a flexible and informed position. In addition to a financial advisor and other experts in specific fields, consider using the services of a coach, mentor, or mastermind group; they can provide invaluable perspective on how (and whether) your actions, decisions, and ideals are all in effective alignment, and if they are not, can help you reassess and realign.

5. Estimate expenses in detail.

Studies at the Robert H. Smith School of Business at the University of Maryland found that people spend less when they have to estimate expenses in detail. Don’t ballpark what your life and the things in it will cost. This is not a ball game, it’s your life. Get down to hard numbers.

6. Establish priorities.

Prioritize plans and pursuits based on core ideals and needs. Money and finances must be balanced with family, work, health, friendships, leisure, making a difference in your community, and taking care of yourself. Neglect or imbalance in one area may generate overcompensation in other areas. Priorities are not static; they are not something you can figure out on a weekend and then set aside for the rest of the year. (Remember the penguins.) You will likely reconfront, refine, and even redefine priorities every day, and make decisions based on your fresh answers to the fundamental question: What is really important?

7. Align your internal ideals with your financial goals.

Your ideals, the internal model of who and what you are, generate the unspoken assumptions on which you operate. Clarify your external goals to be certain that they are consistent with your ideals. The clarity and consistency of your principles and goals can be called on at times of emergency or confusion to help bring the big picture into focus. Be certain there is a fit between your internal and external goals, that what you want to accomplish is consistent with your ideals. This consistency can provide an organizing structure and direction to your ambition.

8. Distinguish needs from wants.

A need is an essential requirement, a necessity for mind, body, or spirit. You can get sick if you don’t have enough of what you need: nutrition, touch, rest, or security. A need can be satisfied. You can also get sick if you have too much of what you want (for example, Mexican food, alcohol, sexual freedom, solitude). Wants (wishes and desires) are replaceable with other wants, but a need cannot substitute for another need. And you can never get enough of that which you don’t need.

9. Determine what is good enough.

The pursuit of perfection results from not having a standard of what is good enough. “More” is not a goal. More money, like perfection, is a quest never satisfied. For perfectionists, failure may even be a relief, ending the relentless and impossible pursuit of perfection. The undefined pursuit of “more” is a guaranteed plan for failure. As playwright Neil Simon said, “Money brings some happiness. But after a certain point, all it brings is more money.” Having an endpoint lets you know when you arrive, when you can feel satisfaction, when you can experience effectiveness and mastery at reaching a goal.

10. Know what reaching a goal will do and what it will not do.

Monetary wealth can provide pleasure, luxury, and financial security, but it may not make your marriage better. It is important to know what achieving a goal will do, so that you have the clarity to distinguish what it will not do. A common mechanism for keeping hope alive is stopping short of a goal so there is no need to confront the illusion that reaching the goal will provide all the hoped-for solutions. Reaching a goal will not undo the past, or make other troubles go away.

11. Don’t invest with your heart.

Never fall in love or hate with a stock—it won’t love you back. It doesn’t even know that you own it. Invest in the stock or bond of a company that you genuinely want to own, not in a “hot trend” or “good story.” Remember that if someone tells you it’s “a sure thing,” it isn’t.

12. Don’t use credit cards.

Numerous studies have shown that people spend significantly more (on average, 23 percent more) when using credit cards than when paying with cash or check. Credit cards make money an abstraction, as well as relegating payment to a future time. Pay in cash.

13. Consider the opportunity cost of your purchase.

Before you spend significant money on an item, calculate what it would be worth in five years if you were instead to invest that same money. And in 10 years.

14. Consider the absolute value rather than the anchor price.

Seventy-five percent off a jacket that’s overpriced by 300 percent is not a deal. A “sale price” is meaningless if it is anchored in an inflated initial price.

15. Consider the actual product and what you will do with it if purchased.

Will you really use it? For how long? One year from now, what choices will you be glad you’ve made?

16. Be suspicious of being “special.”

Special offers or other indications that you are in a select group—an inner circle of unique consideration—will make you buy more than you need. Special, exclusive, unique offers induce a desire to respond with gratitude—and with purchase. Be suspicious of special offers.

17. Simplify your symbolism.

Designer brands are marketed to symbolically represent quality, desirability, and the experience of having arrived. The symbolism of specialness adds cost. The qualities that we attribute to brands create a relationship with the brand that results in both desire and the commitment to pay more. Ask yourself whether you’d pay the same amount for a product if the logo were changed and nothing else.

18. Leave emotions at home.

Emotions hijack the logical brain, and along with it, reasonable decisions. Stress may seek relief through buying, hoarding, or purchasing out of other emotional needs such as insecurity or a desire to win approval. Make financial decisions independently of emotional decisions and distinguish between the two. Worry about the right things.

19. Shop alone.

The social contagion of shopping with friends induces a relaxation of usual constraints, as well as the desire to impress friends with a purchase.

20. Remember that you have the right to say “No.”

Don’t hesitate to say “No.” And don’t hesitate to say yes either when you are clear about what you want and need. The other person in your interaction also has a right to say no or yes. Don’t hesitate, for example, to make a simple request for a fee for service equal to its value.

21. You have to be free to say no before you can be free to say yes.

Unless you are free to say no, yes has no meaning.

22. Disengage from “what might have been.”

Getting what you always wanted in the past may not feel as good as you expected, because it’s no longer the past. If you attempt to reenter an old story and acquire what you missed in the past, it won’t work. “If only” fantasies erode the power of today. To keep a goal just out of reach maintains the “someday” fantasies associated with it. “I’ll lose the 10 pounds, and then I’ll be happy.” The weight-loss goal must remain elusive, or the hope of happiness contained in the loss of the last 10 pounds would be exposed as illusion. The unattainable becomes addictive. It is difficult to sell a stock that has declined significantly. The sale makes a reality of money loss rather than a theory of paper loss. The sale also banishes the hope of future gains. You have to relinquish a past position in order to move ahead. When you let go of the past, you reclaim your aliveness (and effectiveness) in the present.

23. Keep the big picture in mind.

A study by the Joseph Rowntree Foundation found that wealthy Londoners do not feel rich, because they never mix with people less affluent than themselves. When you take a good look at the global neighborhood and realize that half of humanity lives on less than $3 a day, it puts things in perspective. According to University of California sociologist William Domhoff, “In the United States, just 20 percent of the people own a remarkable 85 percent of the wealth, leaving only 15 percent of the wealth for the bottom 80 percent.” It’s good to keep the big picture in mind. The big picture consists of your own ideals and principles, and objectively organizing your life and decisions according to what you believe to be in your best interest. Whenever you might be caught up in details or in the grip of emotion, stop and ask, “What is in my best interest?” The next right step may not always be clear, but you can almost always be clear about what the next right step isn’t.

24. Strike while the iron’s cold.

A study from UCLA found that when purchases were interrupted by a conscious break in the buying process, purchasers became more objective and discerning about the need to buy. Neuroscientists at Emory University found that this delay disrupted dopamine release. A drop in dopamine after you buy is called “buyer’s remorse.” That same drop before you buy is called “coming to your senses.” There are few true emergencies in life. Most decisions involving money really do allow time for consideration. Weighing different factors, gathering data, and perhaps consulting experts works best to make most decisions. Rarely does any legitimate crisis demand that these steps be skipped. In between urge and action lies a gap: Impulsivity erases that gap, while emotional intelligence seeks it out. Create a contemplative pause—a space of time between choosing something and paying for it. Postpone all decisions based on impulse, frustration, or anger until you have regained objectivity. Calling a time out is a useful maneuver for emotionally charged matters. “Let me think about that, and I’ll get back to you,” is a decision. A wise mentor once told me, “Never speak more clearly than you think.”

25. You’ll never do anything important or fulfilling that will feel comfortable at first.

Growth and progress always feel uncertain in the beginning. At the point of jumping in the pool for the first time to learn to swim, you can either proceed despite your discomfort or abandon your task and immediately stop the anxiety. Anxiety signals that you are moving ahead into a new experience—it is not an indication of danger or inability. You have to proceed despite anxiety in order to master the task. If worrying about the future fills the present, both are diminished. A plan is only a guideline, not a certainty. The capacity to endure uncertainty is the essence of growth. The only familiar territory is behind you. Danish philosopher Søren Kierkegaard said, “Life can only be understood backwards, but it must be lived forwards.” Growth and change are hard. In fact, the only thing harder is not growing or changing.

There’s a little-known back door to getting a Harvard degree: the Harvard Extension School.

All you need to do to become a student at the Harvard Extension School is pay a course fee and show up.

If you’re able to complete 3 Extension School courses with a GPA of at least 2.5, you’ll be able to petition for acceptance to the degree program. The admissions criteria are straightforward: if you meet them, you’re in.

The diploma that you receive upon graduation is issued by Harvard University, and there is absolutely no difference in the quality of the courses.

You’ll also have the same benefits of the Harvard reputation “halo” and network.

The total cost of an undergraduate program at the Harvard Extension School is ~$35,000-$40,000. For perspective, the cost of one year of Harvard College’s “normal” bachelors program is $33,696 for academic year 2009-2010.

Harvard Extension School also offers Masters and Professional degree programs

2. In addition to having "any" degree, a degree from Harvard gives you A) name-brand recognition and B) the vast network of high-powered alumni to use as you manage your career. Talk about putting your network on steroids -- from my experience, Harvard graduates stick together and help each other out throughout their careers. And since so many Harvard grads are well connected and hold high positions, who could ask for a better network?

3. Ok, $40k is not a drop in the bucket; it's still $40k. But it's a TON better than $160k!!!!

4. Glad to see they have advanced degrees too. Getting my MBA worked out for me and I didn't go to a top-tier school like Harvard, thought I may have if this had been an option when I went to school.

November 17, 2009

Poor water pressure. Aside from issues of comfort and convenience, low water flow may indicate plumbing problems, such as corroded pipes that will need to be replaced down the road.

Ceiling stains. Something’s leaking.

Troublesome doors. If you have one bad door, it may simply have been installed incorrectly. But more than one may indicate a serious structural issue, such as a foundation that has settled or framing that is deteriorating.

Overloaded electrical outlets or lots of extension cords.

Exterior features that slope toward the home. A porch, patio, driveway or grading that slopes toward the home all but guarantees water in the basement.

Odors. Cigarette smoke and pet odors can be hard to get rid of. And if a home smells too clean -- heavy with the scent of cleaning products (especially bleach) or plug-in deodorizers -- the seller may be trying to cover up an odor, such as mold or urine.

Synthetic stucco siding. This must be installed precisely or else moisture will be trapped behind it, resulting in mold and decay.

A few thoughts here:

1. Some sellers don't get how important these are. We've seen many homes with one or more of these problems and the sellers are either oblivious to the sort of impression they leave or they think buyers are idiots.

2. Don't count on your real estate agent to point out problems like these. In my experience, agents will actually work to downplay these issues with comments like, "Oh, that's very common" or "You shouldn't worry about that" or "You'll only need to do ________ (something easy) to fix that." Don't believe them.

3. Notice how three of these deal with water damage (and the results of water leakage). Water is one of the most destructive forces to your home -- if not the most destructive.

As an update for those of you following along, we've all but abandoned the idea of moving to a new home. We started the process with the intention of only moving if we found the exact right fit (within reason, of course.) After three years of looking, it appears that we won't be able to find a home we like in the location we like with the land we like for a price we like. We're still keeping our eyes open (our agent sends us email updates now and then), but at this point the idea of a move is all but over. Instead, we're focusing on a few upgrades to our current home to make it an even better place to live.

As many of you know, Moose Tracks ice cream has been a sponsor of Free Money Finance from day one. And since you're likely a week or so away from some sort of feasting (not sure why I think that, it's just a hunch), I thought I'd suggest you consider some for your upcoming big meal. You can find Moose Tracks in your area by using their store locator service, then go and pick up a half gallon or two to add some fun and excitement to your Thanksgiving meal!

Highly compensated physicians, attorneys, and managers of public corporations tend to have low wealth indices; that is, they are highly concentrated in the [lower than expected] net worth levels. Managers of private corporations are not. They tend to be quite frugal and invest heavily in their own businesses.

What other occupational groups have significantly higher wealth indices than the norm? Two of the more revealing are engineers and educators, such as teachers and professors. The financial lifestyles of educators, often the lowest-income-generating professions actually have high wealth indices that epitomize the [higher than expected net worth] population in America. Thus, I think it is safe to say that the ways and means to secure wealth building apply to almost everyone who wants to become financially secure.

A few thoughts from me:

1. Many people think that being a doctor, lawyer, or executive is a pathway to wealth (high net worth.) It can be, but more than likely it's a pathway to a high income which will not necessarily (and most likely won't) result in a high net worth.

2. I don't know many doctors and lawyers on a personal basis, but I know tons of business executives/managers. And I've seen time and time again that people who make smart, frugal decisions with their corporation's money have personal finances that are in shambles (many have come to me for advice.) On the other hand, those that own their businesses usually have rock-solid personal finances too. Says a lot about "ownership", doesn't it?

3. Told ya!!!! You won't believe the number of comments I've seen in four years that say "You have to have a high income in order to have a high net worth" (or something similar). No, you don't, and here's more proof of that fact -- some of the lowest-paid professionals (educators) are among the most wealthy professions. Sure, if all is equal (which it never is) having a high income is better than having a low one. But you certainly can achieve a high net worth without a very high income.

Mugger: “Don’t make a move, this is a stickup. Now, come on—your money or your life. [long pause] Look, Bud, I said, your money or your life!”

Jack Benny: “Give me a minute—I’m thinking it over!”

The joke, of course, was that Mr. Benny was such a skinflint, he placed a higher value on his money than on his very life. This routine got one of the biggest laughs of Benny’s long and illustrious career, and became the prototypical Jack Benny gag. Of course, no one in real life would say such a thing. Or would they?

An Expensive Hobby

When I met Denise she had been a collector all her life. One of her earliest memories was of collecting china dolls. The essence of her passion for collecting was the sense it provided her of being in control. In the act of acquiring, arranging, and rearranging her small family of dolls, Denise had absolute command over her little universe.

By her thirties her passion for collecting had grown, and she began purchasing through catalogs so as not to be distracted by having to interact with anyone. By age 40 she had switched to the Internet, spending many hours a day perusing online auctions, trolling for more china dolls. She was building a valuable collection, she told herself.

On many occasions Denise attempted unsuccessfully to curtail her Internet spending. She set a weekly limit of time and money, but promptly defied her own authority, rationalizing that the pursuit helped compensate for feeling lonely, empty, or depressed. Yet despite her belief that her continued collecting would make her feel better, the momentary excitement she would feel when the newest acquisitions actually arrived at her home would quickly fade. She soon reached the point where the only thing that would put a halt to her online activity was either exhaustion or when she would run out of money from her monthly trust allotment.

At 43, by the time I met her, Denise had developed considerable expertise and a collection of significant value to go with it. In addition to the hours she spent every day arranging and cataloging her collections, she was spending $8,000 to $10,000 per month from her trust fund on additions to her collection. Her preoccupation now absorbed most of her days and was draining away her inheritance. In a very real sense, it was draining away her life.

If Jack Benny’s mugger had burst in upon Denise and demanded, “Your doll collection or your life!” what would she have said?

The Cost of Money

I first entered the workforce at the worldly-wise age of eight, as a paid farm hand. On hot summer days I would chop cotton for my dad, earning a whopping ten cents a row. The work was hot, hard, and dirty. That summer, I earned every cent I made.

After work I would meet up with my classmates, many of whom were also experiencing their first forays into the world of autonomous economics. Topped up with change from their paper routes and chores, they would hit the nearest store, where they would trade in their fresh assets for sodas and candy. Naturally, I joined them. My treats were quickly gone, and my hard-won pay with them. I was left standing, tired and dirty, wondering, “Was that candy worth a half a row of work?”

It was one of my earliest lessons in the cost of money. Not its value—I knew exactly how much candy a dime could buy—but the price I had to pay to get it. I learned that you don’t just buy things with money; you have to buy the money with something, too. It wasn’t long before I learned to ask myself, “Will I get enough from this soft drink to justify one row of cotton chopping?” The answer was no.

Yet as simple as this lesson would seem to be, it is one that we hide from ourselves again and again.

Chances are good that if you listed five things that you truly value, your answer was something like, “None of them!” After all, if it’s something you value highly, why would you trade it for mere money?

On the other hand, depending on what you put on your list, you may have thought about answering the question with another question, such as, “Just how much money are we talking about here?”

That is the question David and Diana Murphy wrestle with in the novel and film Indecent Proposal. Desperate for money during an economic reversal that threatens to take away everything they have, they hit Vegas in hopes of winning big. The stakes are raised when David is approached by a wealthy man who offers to give him one million dollars—in exchange for one night with his wife.

Even as children we are fascinated with endless variations of this lurid dilemma. How many of us remember playing the game that goes, “Would you [fill in the blank with a despicable or repellent act] for a million dollars?” As grown-ups, we get to watch the fantasy play itself out—and reality TV shows are only the latest in a long tradition of “Can you believe they did that for money?” spectacles.

Hardly a season goes by without yet another sensational story in the press about a politician, sports star, or high-profile businessperson who gambled his or her entire career playing some version of this game and acting out the answer. We shake our heads with disbelief, because we would never do that.

Would we? Perhaps not, at least not in such a dramatic, high-stakes way as with Denise, or David Murphy, or whomever sits at the eye of the latest media-scandal storm. But are there smaller or more subtle ways in which we do exactly that?

Here are some of the most common compromises we make, often without fully realizing we’re doing it, in our struggles to sort out the most important layers of meaning in our lives.

Trading Time for Money

Of all the precious things we trade for money, by far the most common is time.

Time is the basic unit of exchange for most of the working world. If we want more money, most of us need to spend more time to get it, and the trend has been for us to want more and more of it.

Yet we also insist that it’s time we want, and not the money itself. A survey by the Pew Social & Demographic Trends Project found that 67 percent of respondents ranked free time as their most important priority, compared with only 13 percent who valued wealth the most.

At least, that’s what we say. How we act tells a different story altogether. Collectively, American workers give a whopping 1.6 million years’ worth of unused vacation time back to their employers every year. That’s leisure time which we choose to trade for more money, more accolades, or the hope of climbing one rung higher on the ladder.

The irony of our time-money exchange is that we keep trading time for money in order to buy back more time. And time is running out.

Trading Freedom for Money

Lamar founded a thriving personal service business. His company and its growth were his creation, an expression of the creativity he had not experienced working for others, or earlier working for his father in a similar business. Although he had given much of his personal time and energy to the long hours in the dozen years to grow his company, he enjoyed being his own boss.

Lamar used money to represent the freedom that he had created—to do whatever he wanted, whenever he wanted. He felt good about his accomplishment, and the money he had amassed.

Then he decided to cash in on his hard work, and sell his company to a large, multinational corporation. The deal promised a massive profit, a windfall Lamar simply couldn’t pass up. He stayed on as a consultant, but his narrow role in the new system felt confining to him. He was now wealthier by an order of magnitude, but no longer CEO of his own company. Lamar finally realized that he had paid the currency of freedom to acquire its symbol, the wealth of money.

Trading Health for Money

In 1969, a young worker at a large Japanese newspaper corporation died of a stroke. His death would become the first official case of karoshi, or “death by overwork,” a phenomenon that The Economist would later call the corporate equivalent of hari-kari. By the 1980s, karoshi was legally recognized as a cause of death in Japan, with court judgments for the families of victims rising as high as a million dollars.

While karoshi remains an extreme example of the impact of the time-money exchange, overwork is taking its toll on our health in other ways. The American Institute of Health estimates that stress has a $300 billion cost, exacted in the form of turnover, compensation, insurance, medical expenses, and reduced productivity. Increased incidences of mental health conditions, particularly anxiety and depression, are being linked to work and money-related stress.

We’re suffering mentally and physically, and the problem seems to be worsening.

Trading Family and Relationships for Money

If there ever was a time when the stereotypical image of the father and son playing catch on the weekends was true, it’s behind us. Americans spend about 40 minutes each week playing with their kids. That’s less time than we spend shopping and watching television by a very wide margin.

It’s not only our children who feel our inability to understand the language of money. Money is the most common relationship conflict for couples. A survey by the Financial Planning Association found that 40 percent of financial advisors cited money as a “key factor” in a couple’s decision to split up. And while many of these relationship issues really are about money, many use money as a language to express relationship conflict or the dynamics of power. Who controls finances? Who makes big money decisions? How are money disagreements resolved?

The same money equation that uses money as a currency for power can destroy the very relationships that might provide love and happiness.

Trading Happiness for Money

In their book Being: The Foundations of Hedonic Psychology, a group of scholars examined the connection between money and happiness and found that money correlates weakly with happiness (about equally with good looks and intelligence).

And the strongest correlation with happiness? Marriage. The very thing that too often suffers most in the quest for financial gain turns out to be the single most likely predictor of happiness. After marriage, the next strongest happiness predictors were other relationships, including family and friends, and immersion in life, exercise, and spirituality—all things that we frequently sacrifice in the pursuit of wealth.

Our pursuit of happiness through wealth would seem to push joy only farther away and replace it with fear, envy, greed, and shame.

Trading Wealth for Money

Is it possible we’re sacrificing wealth in the pursuit of money? As paradoxical as that sounds, there is compelling evidence that we are doing exactly that.

In April, 2005, the United States officially became a nation of spenders. That month, we spent more than our after-tax incomes, creating a negative savings rate. The trend continued into the following year, and 2006 marked the first full year since the Great Depression that we spent more than we earned. A look at the balance sheet of the average American citizen in 2006 and 2007 would reveal that they were worse than broke.

The middle of the first decade of the twenty-first century, however, was anything but the Great Depression. Incomes had been increasing for decades—there had never been a better time to save a few extra pennies—but climbing along with our income (and eventually surpassing it) was our spending. And that spending was driven by our money story.

November 16, 2009

If you've been a reader of Free Money Finance for more than 15 seconds you've heard me talk about the importance of managing your career. I've offered lots of thoughts on the subject of how you can build/grow/maximize your career, but I haven't dealt a lot with taking risks to boost your career (as highlighted in this piece from the Wall Street Journal.) I did mention taking risks a few times (mostly in passing) when I detailed all the jobs I've ever held, but I thought I'd add a few more comments/thoughts to the times mentioned in that series.

First of all, taking risks can definitely be a way to boost your career. Just like with investments, the higher the risk, higher the reward (usually.) So if you want to propel yourself and your career ahead by a leap or two, taking a big risk and being successful at it is certainly one way of doing so.

Of course, there's the downside to that option as well -- it's risky. And while you can try and select "risks" that you think you can control/deal with, events are often not controllable (especially when the situation is volatile.) In these cases, you can actually fail in your efforts and your career will take a hit (or two.) And thus the dilemma -- is it worth it or not to take risks to propel your career?

I've taken a few big risks (I think we all probably take minor risks here and there over time, but that's not the subject of this post -- I'm referring here to big risks that carry the chance for big success or crash-and-burn failure.) A few of the ones I've taken:

I moved to a new division that was in tough shape and the business I managed was in danger of going bye-bye. This was an instance where taking a risk paid off since I was able to turn the business around and was rewarded with more responsibility and managing a huge portion of our company's portfolio.

I changed industries and got a bit off the track that I had worked to develop the first several years of my career. I'm going to give this risk a semi-thumbs-up. The upside was that I enjoyed the company, the people, and the industry much more. It also set the path for my career that continued to lead to success. The downside is that I probably could have made more money staying where I was Oh, and that the job turned into a nightmare over time.

I joined a start-up during the dot com boom. I think we all know how that turned out. Luckily for me I landed on my feet, but this was certainly a risk that didn't turn out anywhere what I hoped for or expected. And to make matters worse, I invested in the company as well. Ugh.

I went to work for a very small, relatively obscure company. It's been a great place (good compensation too) to work for five years and I can actually see myself retiring from this place one day. On the downside, it's in an industry I'm not that familiar with and my old network has been lost as a result of the move. I'm not sure where my career would take me if I left this position. That's one reason I'm focused on building up my network.

How about you? Have you ever taken a risk to try and grow your career? What happened?

If you want to become wealthy [the way other wealthy people have], live in a neighborhood where your household is among the top income generators. For example, what if your household's total realized income is in, say, the high five figures? Then live in a neighborhood where the median market value of a home is less than $300,000. Do so, and the chances are that among your neighbors, your household will likely be in the top 20 percent along the income continuum. Then live and consume as though your household's income was only 80 percent of what it actually generates. Save and invest the rest. Now you are on your way to becoming wealthy.

What is a good rule if you are determined to become wealthy? The market value of the home you purchase should be less than three times your household's total annual realized income.

If you're not yet wealthy but want to be someday, never purchase a home that requires a mortgage that is more than twice your household's annual realized income.

A few thoughts from me:

1. I'm predicting that several people will hate this post. People don't like being told what sort of house to buy. ;-)

2. The author gives us the saving amount that seems to make most people wealthy (or so I assume from the info above): 20%. It looks like to me that if you can save 20% of your salary, you'll end up wealthy. There, now that is easy, isn't it? :-)

3. Do the two pieces of advice ("the market value of the home you purchase should be less than three times your household's total annual realized income" and "never purchase a home that requires a mortgage that is more than twice your household's annual realized income") imply that you should put up to 1/3 of a downpayment on any home you buy? If the home is worth three times your income and the mortgage can only be two times your income, that means you have to put at least 1/3 of the home's value as a downpayment, right?

4. I GUARANTEE that someone reading this (if not someone commenting) will say that the formula above will not work on the coasts and/or in higher-cost-of-living cities. My responses to that are:

If you don't want to become wealthy, there's no problem. Buy whatever house you want in whatever city you like.

Even if you buy a home outside these parameters, you still MIGHT be able to get rich if you are able to save the 20% of your income. I'm not sure, but it's at least an option to consider. (A way to do this would be to cut your spending in some other area where others spend more.)

6. The advice above is what we've used to buy our homes. Since we've been married, we've owned three houses. Here are the breakdowns on them:

House 1 -- Value was 1.4 times our household income, mortgage was 1.2 times our household income

House 2 -- Value was 1.4 times our household income, mortgage was 1.1 times our household income

House 3 -- Value was 1.2 times our household income, mortgage was 0 times our household income (we paid cash for this house)

My wife was working when we purchased our first two homes. By the time we got house #3 she was staying home full-time with the kids. These sorts of results are possible when do you what I've been preaching on this blog for years: manage your career to maximize your income, work to add additional income, and keep your spending under control. For the most part, this is also what the book advises, though they focus less on generating income and more on controlling spending.

It seems everywhere we look these days, we see something telling us how bad the economy is and how tough times are. I agree that for some this is true but, from personal experience, you can still live a wealthy life on a moderate income.

My name is Danny Kofke and I am a school teacher and author of the book ""How to Survive (and Perhaps Thrive) on a Teacher's Salary". My wife, Tracy, is a former teacher and now stay-at-home mother to our two young daughters. Despite earning a moderate income, we have no debt except our mortgage, have a 12-month emergency fund, invest so that we are on track to retire with a sizable nest egg, and live a financially secure life on a teacher's salary.

Here are some steps Tracy and I took that have enabled my family to thrive on a teacher's salary:

Build Up An Emergency Fund

This was the key step for us. I think this is important in case Murphy's Law comes knocking. You never know when/if the transmission in your car will go or the air conditioning unit for your house breaks in the middle of August. Tracy and I wanted at least $3,000 in this fund before moving on to the next step (we added more later on as we had less debt). We wanted a couple months of living expenses in this fund in case an emergency - when I say emergency I don't mean a 50 inch plasma television either - happened. This way we had the cash on hand and did not have to use credit cards to pay for an unplanned event.

Pay-Off Your Debt

After getting $3,000 in an emergency fund, Tracy and I started paying off the debt we had. We paid-off our credit cards and car - we just had one car at this time. I know some recommend paying off all your debt at this point but we kept Tracy's student loan and our mortgage because we wanted to move on to investing so we could use the magic of compound interest to our benefit.

We paid off our credit cards by taking the card with the smallest amount first and focused on getting rid of that. I know some recommend paying off the card with the highest interest rate first but we wanted to build traction and see some results fast. I think money problems are mostly emotional. Most people know it is not wise to use credit cards but still do it because what they buy with them makes them feel good. We knew if we saw immediate results in paying off our debt we would be much more likely to stick with it. I think this is similar to someone trying to lose weight. If you go on a diet and lose 3 pounds in week one and 2 pounds in week 2 you are more likely to stick to it. However, if you don't lose any weight after a couple of weeks, you are more likely to start eating unhealthy again. I feel that getting out of debt is somewhat like losing weight - once you get the ball rolling and see results you are motivated to continue getting rid of it.

Invest/Continue To Build Up Your Emergency Fund

At this point, Tracy and I started to invest in a Roth IRA. We just started with $100 a month and have increased this as my salary has gone up. $100 a month does not sound like much but, if a 25 year-old invested this amount every month for 40 years and earned a modest 7% a year, he/she would have over $262,000 at age 65! I don't think this is enough to retire on but it is better than nothing.

In addition, at this point, Tracy and I steadily built our emergency fund up to one year's worth of living expenses. This was before the recession so a lot of financial advisors were just suggesting 3-6 months of living expenses in this fund. We knew that Tracy would be staying home for as long as possible - it is 5 years and counting now - and we wanted to make sure we had enough money to cover our expenses in case something crazy happened. This fund has turned potential catastrophes ($700 car repairs, expensive doctor's visits) into inconveniences. This might be too large amount for you, but this is what helps Tracy and I sleep soundly at night.

When dealing with your finances, you have to remember that the person that cares the most about them is the one that looks back at you in the mirror each morning. It is not some advisor down the road or someone on TV. The steps Tracy and I have taken have given us a sense of financial peace and have enabled us to live a wealthy life on a teacher's salary.

Are U.S. churchgoers stingy? That's one possible conclusion from a newly updated report that shows if parishioners tithed the biblically recommended 10 percent of their income -- instead of their current 2.56 percent -- an extra $161 billion would be flowing to charity.

Whether you believe in tithing or generous giving, it seems to me that 10% of gross income is a reasonable giving goal for Christians to shoot for. And if we all did give 10%, we'd have an extra $161 billion to feed the poor. Now look at where our government spends our money and see what $161 billion PER YEAR could do. I'll save you the time and cut to the chase: it could do a lot.

Before I go on, let's round out this discussion with a few more bits of information:

Churchgoers, at 2.26 percent given to charity, outpaced the general population, which gave 1.8 percent. Nearly two-thirds of all U.S. charitable donations were funneled through churches or religious institutions.

Financial vitality, they say, is a key indicator of overall church health. Money given to the church is divided into two sub-categories for analysis: benevolences (such as international and local missions, denominational support and seminary support) and congregational finances (such as salaries, operating budgets and building costs).

Giving for benevolences in 2007 hit an all-time low, with an average of just 14 percent of member contributions going to needs beyond the church, down from a high of 21 percent 40 years ago. Ronsvalle said this may indicate churches believe that "maintenance is adequate" and are more concerned with being financially sound than contributing to missions.

Ronsvalle said churches have become complacent -- "lukewarm" is the term the Bible uses -- and are no longer challenging themselves to do extraordinary things. There is a "lack of vision" and churchgoers have a hard time seeing how their contribution to missions can affect the world or its problems.

A few more thoughts:

1. Ok, so Christians are marginally better than non-Christians at giving. But there are what -- something like a bazillion verses on giving in the Bible? Wouldn't you expect someone who reads/believes what the Bible says to give a whole lot more than Mr. and Mrs. Average who may or may not be reading the same sort of stuff on giving? I would hope so.

2. Looks like churches are better at building buildings and paying staff than anything else. Now don't get me wrong, there certainly is a place for this (we need places to worship and people to minister after all.) But if we all gave at the 10% level, there would be a better balance -- something like 2% going to churches and 8% going to help the needy.

3. The reference to "lukewarm" is one that's hard to comprehend in just a few verses because it's from the book of Revelation (tons of symbolism). That said, I wanted to share it with you anyway:

These are the words of the Amen, the faithful and true witness, the ruler of God's creation. I know your deeds, that you are neither cold nor hot. I wish you were either one or the other! So, because you are lukewarm—neither hot nor cold—I am about to spit you out of my mouth. You say, 'I am rich; I have acquired wealth and do not need a thing.' But you do not realize that you are wretched, pitiful, poor, blind and naked. I counsel you to buy from me gold refined in the fire, so you can become rich; and white clothes to wear, so you can cover your shameful nakedness; and salve to put on your eyes, so you can see. Those whom I love I rebuke and discipline. So be earnest, and repent. Revelation 3:14-19

4. Someone's going to say it, so I might as well bring it up. They'll comment something like, "That's why we pay taxes -- to help the poor and needy. That's how we 'give.' " My response is that's a cop-out. I see verses on giving in the Bible, I see verses on helping the poor, and I see verses on paying your taxes, but I don't see anything that says, "Pay your taxes and you don't need to worry about giving or helping the poor."

5. It just seems to me that we're losing lots of opportunities to give to those who are hurting -- especially in this time of economic trouble. It seems like such a shame.

2. In order to ensure happiness and contentment financially, with no more money problems and worries, my annual income would need to be $_______________

A few thoughts on this:

1. I think it's a great question (or exercise if you prefer -- I guess it's not technically a question) because it's very thought-provoking IMO. If you're not happy with what you make now, what amount will make you happy? Or will making more ever make you happy?

2. Of course, we all know people (and I write about them often) who make more only to spend it all -- and they are no better off (and not happier either.) So is income the real issue here?

3. For me, I'm way past the "happiness" level of income. Sure, I'd prefer earning $10 million a year (I could do this for three months and then retire), but realistically I am completely happy with my level of income.

Forbes admits, of course, that its findings are very non-scientific. Though they are interesting to review, I doubt that they have any correlation with actually becoming a billionaire. In fact, other than "have a brilliant business idea, do it better than anyone else, and stick with it", there's probably not a whole lot of direction one can get for how to become a billionaire.

Becoming a millionaire, however, is something that's relatively easy to achieve. Simply follow the basics.

Update 8-29-16: I do not accept sponsored posts from anyone on any topic for any reason. If you email me asking to do a sponsored post, I will not respond as you should have done your homework in advance and have read this.

Soon after this blog was started several years ago (once I actually started earning anything -- that took a few months), I detailed my ad policy on Free Money Finance. That post laid out my philosophy for advertising -- I used ads from Google as well as some other sites/services that I trusted, used, and or recommended and all the proceeds from every sort of ad was given to charity. Since then, my policy hasn't changed, but given the new guidelines I thought this was a good time to restate my position/philosophy so that we're all on the same page:

I do have ads on the site. There are Google ads that I do not control (ads that they serve that theoretically tie in with the material I've written on the site) on the top left sidebar (listed as "Sponsored Links"). In addition, there are other ads and affiliate program ads (like in the top right sidebar listed as "Site Sponsors") on the site as well.

In addition to ads, I also use affiliate ads and links. These work as follows: someone clicks on the ad/link, if they like the product or service they buy it, and I get a portion of the sales price. They do not pay a higher price this way -- they simply buy at the going rate and I receive a portion of it for referring them. These are most used in posts I do on books (linking to Amazon), examples being this post (there's a link to the title of the book) as well as this one that links to You Need a Budget. As for credit cards, Free Money Finance has financial relationships with some of the cards mentioned here, and Free Money Finance may be compensated if consumers choose to apply for these links in the content, and ultimately sign up for them.

Other than the Google ads, I select what goes on the site and what doesn't. I'm fairly selective, sticking to products and services that I either know/use or like/recommended (even though I don't use them.) An example of the latter would be You Need a Budget. I don't use that software since I have my own, self-developed budgeting spreadsheet. But I like what they offer (I've seen their product) and I've had enough positive comments about them from readers that I feel comfortable offering their products here.

I weed out a lot of the riff-raff. Believe me, I've get lots of offers from all sorts of sites (payday loans, debt consolidation, etc.) as well as text link ad offers that don't work for this site. Basically, if I don't think the ad/affiliate program will benefit at least half of my readership, I don't run it.

I do actively solicit ads and have developed a policy for them. If you'd like to advertise here and you have a product that would help out my readers, drop me a line. :-)

All of the money I earn here -- every last penny -- is given to charity. Every year I list what charities the blog has supported (see the bottom of this page for details) and I will continue to do so. So far, we're closing in on $200,000 given to help people out all over the world.

Of course, I could choose to have no ads at all. But I prefer to have them and use the funds generated to help the needy. That said, you can have been a reader of Free Money Finance for years and never have generated a penny for the site. That's a pretty good value for regular, free personal finance content if I do say so myself. :-)

If you're "worried" that anything you see here is an ad or isn't, the best policy is to assume it is and handle it as you see best in that light. For the time being, I plan to use this post (which I'll link to from my sidebar) as my general ad notice and not list such on each and every post that has ad/affiliate links (it junks up the posts/site). That said, I may eventually need to include something on every post with an ad/affiliate link in it (which will get quite burdensome). As I noted, it's not clear what the government guidelines do and don't call for, so the future is murky.

And of course, you can always email me with questions, thoughts, comments, etc. if you have any concerns or feedback you'd like to share.

Sorry to take us off the topic of personal finances to deal with the "business" side of the blog. We'll get back to how you can grow your net worth in the next, upcoming post.

For weekday updates of what I find to be some of the most interesting personal finance articles on the web, follow me on Twitter. For now, here are some pieces I found especially worthwhile and some of the carnivals Free Money Finance was in this week and my posts that were included:

November 12, 2009

I do use Quicken's desktop version mostly to track spending, investments, and net worth, but other than that, I don't use any website to do those tasks. I do, of course, read TONS of financial sites and blogs to get information and keep learning, but that's it. And I don't think there's one "best" financial website for me -- I think I do much better when I refer to several of them on a regular basis.

How about you? Do you have a "best" financial website for your finances?

I am currently in a fixed rate mortgage with 27 years left to pay and a balance of $104,000. My interest rate is 8.62%. Is it wise for me to try to refinance at a lower interest rate in order to lower my monthly payment or should I just stay put and ride out the storm? My eventual goal is to sell the house if the market ever turns back around so I don't plan on riding out the entire 30 years anyway. Right now we are upside down in our mortgage so to sell is not an option.

In 2007, 25.9 percent of wives were earning more than their husbands in households where both spouses work, according to the most recent data available from the Bureau of Labor Statistics. That’s up from 17.8 percent two decades earlier.

Among all married couples, including those where the husband isn’t necessarily working, 33.5 percent of women were making more than their husbands, according to the 2007 data.

The recession has likely exacerbated the trend; nearly three-quarters of the approximately 7 million people who have lost jobs in this recession have been men. The unemployment rate for adult men stood at 10.3 percent in September, compared with 7.8 percent for women.

65.3 percent of women and 61.2 percent of men strongly agreed with the idea that they are comfortable with women earning more than men in a household.

I'm surprised it's that high -- one-third of women make more than their husbands. Will probably be half of women within the next couple of decades.

So, this information makes me want to ask:

Who earns more in your marriage? Do you have any problems with this arrangement? (no matter who earns more)

Currently, I earn more in our marriage since my wife is home with the kids. But early on in our marriage we were fairly close in salary -- I was $20k or so ahead of her but we both had great careers. But we always planned on her being home once we had kids, and we planned accordingly for it -- living on my salary only. It's been a great arrangement and so far has worked out perfectly.

Now, my plan is that once the kids go off to college, my wife can start her career again and I can retire early! (Just checking to see if you're reading, honey!) :-)

The end of the piece has some information about Michigan Governor Jennifer Granholm who is married to a stay-at-home husband. I couldn't resist this quote:

“He's actually better at parenting than — than I am,” she said.

My guess is that he'd be a better governor too (no, nit because she's a woman, because she's a buffoon killing our state) -- but that's for a different post. Thank God for term limits...

November 11, 2009

I read one of your older 2008 posts about what order to invest in (meet company matching in your 401k before opening a Roth IRA), and I wondered if you have cash left after that, do you then open another Roth IRA if you’re married? Or do you go back to increasing your 401k? In case it depends on some stuff, here’s our quick financial summary...

My husband and I are 26 and live in Houston, TX. He is a middle school teacher ($43000) and I am an office worker ($35000). We live on about $40,000 a year (a little less). As of now, we do not have any plans to have kids…being a middle school teacher or a wife of one makes you a true believer of birth control. :-)

We bought our $130,000 1750 sq. ft. home as a foreclosure for $114,000 2 1/2 years ago and put 20% down on a 15 year loan at 5.375%. Since I overpay the mortgage, we have $78,000 and 8 years left.

We have one car loan on his 2007 used Prius at a 4.1% rate and have about $12,000 left ($330 a month). My Chevy Aveo is paid off and is only 4 years old with 37,000 miles. I will drive it until it won’t drive anymore and then get a used Prius as well (ours really does get 46-52 MPG for my hubby and I hate stopping all the time to fill up in my tiny car…10 gallon tanks stink).

We have no other debt. We do use credit cards for almost everything (I love my Discover), but we use them for the rewards and to budget. They get paid off every month.

We have $15,000 in ING Direct in case one of us loses our job (emergency fund)…that should be able to supplement us for a full year if only one of us was unemployed or 4-6 months if we both lose our jobs at the same time. For retirement, we put 6% to my 401k which is matched at 6% (12% total to a Vanguard Target Fund). We also contribute to his state pension, I’ve been contributing the maximum $5,000 to my Roth IRA for the last two years (Fidelity Target Fund), and my husband invests about $2,500 a year in the stock market (we really like Johnson & Johnson right now, but our money is spread out over 9-11 stocks).

And my husband is currently getting a masters, which we have been paying for 100%...but he graduates Dec 2010.

So, when we have some extra money starting when my husband graduates ($625 a month), do we get another Roth IRA, increase my 401k, put more in stocks, pay off the car, or put it towards the house? Or do that in some combination? Also, are we on track to retire in our mid-fifties as planned? His pension could start at age 52 since that would be 30 years of working in a school disctrict.

I detailed in that post the reasons she had for hating me -- I was dating a woman the boss hated, I made a few mistakes in managing projects, I tried to do some new things in new ways in an old, this-is-how-we-do-it company, and so on. Add to these that our personalities just didn't click. Not at all. Not one little bit.

So what did I do? I bailed and moved. After determining that I had zero future at the company (I had a friend go to my bosses' boss and ask what the future held for me and got a "not much" response), I found a great job at a great company and moved on.

How about you? Have you ever had a boss that's hated you? What did you do about it?

If you haven't signed up for my giveaway newsletter, now's a good time to do so. I'm putting the finishing touches on the November issue and we've got lots of great prizes! They include a $50 SmartyPig gift card, three copies of Quicken personal finance software, one copy of You Need a Budget software and one box of books containing eight personal finance books. If you want a chance to win any of these, sign up now for my giveaway newsletter.

Exactly a year ago I encouraged you to avoid another lost decade in the markets. I recommended a specific balanced portfolio that today is beating the S&P 500 by 9.4%.

At the end of September, the S&P 500 was down 6.9% after one of the most volatile 12 months in the market's history. Even over the past 10 years it lost money with an annualized return of -0.15%. So although buy-and-hold investors are relieved the markets have recovered much of their losses from lows in early March, all is not dividends and capital gains.

To add to their distress, many buy-and-hold investors did not even receive the market return. They purchased closet index funds with overly inflated expense ratios. Excessive fees sapped value from their investments while the underlying strategy proved fruitless.

Many active investors fared far worse. In their scramble to avoid bloodshed, they sold near the lows. They didn't get back into the markets until the recovery passed the point at which they had exited. Timing the markets this past year was nearly impossible. The drop was precipitous, but the recovery was equally steep. Those who rebalanced at the low took money out of safe investments and bought into equities just when the outlook was the bleakest. These fortunate contrarians boosted their returns significantly.

So did those people who simply diversified into the blended portfolio I recommended a year ago. That portfolio experienced a 2.48% gain over the past year in contrast to the S&P 500's 6.91% loss. It beat the S&P 500 by an impressive 9.39%.

We generally do not recommend S&P 500 index funds. The S&P 500 is a capitalization-weighted index. It tends to buy more of a stock when it goes up and hold less of a stock when it becomes more reasonably priced.

If the S&P were a financial advisor it would say, "Let's buy mostly large-cap growth stocks in the industry that did well last year with a high price per earnings ratio." The result would be a very aggressive and volatile portfolio that does better at the end of a bull market than at the beginning. And it does miserably at preserving capital during a bear market--exactly what happened over the last decade.

So if you are invested primarily in funds that mimic the S&P 500, a lost decade should be no surprise. If we use market history to run hundreds of Monte Carlo simulations on a portfolio invested in an S&P 500 index fund, projections indicate returns at or below zero about 6% to 7% of the time. This scenario is an astonishingly accurate snapshot of trends in the past 100 years in which six 10-year periods showed no gains. These periods were the 10 years ending in 1914, 1921, 1932, 1938, 1974 and 1977.

If you were invested in the Vanguard 500 Index, your 10-year average return through the end of last month was -0.23%. The official rate of inflation during the past decade averaged 3.0%, but in reality it was probably at least 5%. If you were invested in an S&P 500 fund, your decade-long progress toward your retirement goals has stalled significantly.

But if you were a savvy investor, you did not lose this past decade. If you committed to a balanced portfolio, you experienced both higher returns and lower volatility.

Even a balanced portfolio of just six different common funds could have boosted your 10-year average return to 6.21%. And it would have lowered your volatility from a standard deviation of 16.25% to only 14.83%, a 6.36% better annual return with 1.42% less volatility.

The portfolio I recommended didn't cherry-pick investments that have done the best recently. Rather it chose widely used funds from each major asset class.

My comparison portfolio allocates 20% to fixed income in the Vanguard Total Bond Index (VBMFX). Of the remainder, it designates 31% to U.S. stocks with 21% in the Vanguard 500 Index (VFINX) and 10% in the Vanguard Small Cap Index (NAESX). Another 31% goes to foreign stocks with 21% in Vanguard Total International Stock (VGTSX) and 10% in the Vanguard Emerging Market Index (VEIEX). The final 18% is invested in hard asset stocks in the T. Rowe Price New Era Fund (PRNEX).

The funds just described have been popular for over 10 years. They have not made their gains from active trading. And they have low expense ratios. These are not necessarily the ideal funds to select today. Nor is this the flawless asset allocation. These are simply reasonable funds in each asset class.

Both in theory and practice, a balanced portfolio has proven to be a far superior way to meet your financial goals. In Monte Carlo simulations, balanced portfolios earn money over a decade, even the bottom 5% of random returns. The exact portfolio construction is less critical than including asset categories with a low correlation to the S&P 500. A well-balanced portfolio should result in good returns with lower volatility. Returns will still vary widely because the markets are inherently capricious, but the worst cases should be considerably better.

Of the six holdings listed here, the best return over the past 12 months was the Vanguard Emerging Market Index (VEIEX), up 17.38%. This holding dropped the most a year ago but recovered even faster.

Downward pressure on the U.S. dollar has continued in recent months. So we are still strongly advocating portfolios that hold a significant percentage of assets denominated in other currencies. These assets include foreign and emerging stocks, foreign bonds and hard asset stocks.

Holding on to an undiversified portfolio will, on average, keep on providing inferior returns with higher volatility. Don't continue to wait in vain for a poorly balanced portfolio to satisfy your investment requirements. You can't afford to miss another year or another decade.